Tower Research is quietly recruiting top quants with a twist on hedge fund SMA deals

"Tower Research Capital, one of the biggest names in quantitative trading, has quietly become a player in one of Wall Street's hottest talent races - backing external traders. In the battle to attract top investment talent, hedge funds such as Millennium, Qube, and Schonfeld have increasingly pitched a tantalizing setup to prized candidates: Rather than joining another in-house investing or trading team, they can set up a separate vehicle to run the firm's capital under their own banner."

"Instead of an SMA, Tower offers select recruiting targets what it calls a "Software Vendor Agreement," or SVA, to quants that might otherwise set up their own trading firms. The deals vary by team, but the basic contours are the same, people familiar with the contracts said: External teams keep control of their intellectual property and brand while using Tower's technology, connections, and capital - and sharing any profits they generate."

Tower Research has adopted Software Vendor Agreements (SVAs) to recruit external quantitative trading teams, a variation on hedge-fund separately managed accounts (SMAs). SVAs allow external teams to retain intellectual property and brand while accessing Tower's technology, connections, and capital. The arrangements typically include profit-sharing and vary by team. SMAs have grown substantially industrywide, with assets in SMA-style strategies reaching $315 billion last year. Tower began experimenting with SVAs years before the recent surge in SMA-style deals and leverages its infrastructure and resources to support independent portfolio managers.

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